Analyst: 'Unloved' Oil & Gas E&P is 'Premier Permian Growth Story'

A Raymond James report made the case for revising its rating on this energy company.

Oil rig and money

In an Oct. 22 research note, analyst Pavel Molchanov reported that Raymond James upgraded its rating on Occidental Petroleum Corp. (OXY:NYSE) to Strong Buy from Outperform to reflect the oil and gas company's "unwarranted" stock underperformance against the backdrop of higher oil price forecasts.

Year to date, "unloved" Occidental is down 2%, whereas the oil and gas exploration and development sector overall is up 8%. "This underperformance has widened the dividend yield to 4.3% while erasing the stock's traditional valuation premium," Molchanov highlighted.

The analyst pointed out the market most recently reacted negatively to Occidental's opting to leave the Qatar ISND concession when it expires in October 2019, but that was an overreaction. "If the company had decided to re-up, this would have involved a long lead time field redevelopment with increased upfront capital spending that would have wiped out much of ISND's current free cash flow," he explained. "Thus, by exiting instead of re-upping, the company is following a capital disciplined approach."

Also at play in the Occidental story are oil prices, and Raymond James expects them to be higher next year, Molchanov relayed. For 2019, the financial services firm increased its projected West Texas Intermediate (WTI) and Brent oil prices to $77.50 and $90, respectively. Raymond James estimates a peak price in 2020 of $92.50 WTI and $100 Brent and a long-term average price of $75 WTI and $80 Brent.

These higher prices would affect Occidental's 2019 peak cash flow yield by 8%, as opposed to 6%, noted Molchanov. The company would have about $2 billion available for share buyback, which Raymond James sees as upside.

Also worth noting, Molchanov wrote, is strong production growth in the Permian Basin. "We forecast Permian liquids growth of 17% in 2019, driving all-in companywide growth of 8%." Further, the current midstream bottlenecks in the Permian do not impact Occidental, because "ironclad access guarantees are in place for its Permian barrels well into the next decade."

Raymond James has a $90 per share target price on Occidental, whose stock is currently trading at about $68.23 per share.

New service from OilVoice
Trip Shepherd is for companies who need to track their staff in areas of risk.
It's free to use, so we invite you to try it.

Visit source site


e&pNYSERaymond JamesPermianPermian BasinUnited StatesUSAonshoreOccidental Petroleum

More items from oilvoice

Cyber Security Experts Unite to Protect Europe’s Critical Industries

CS4CA Summit Returns to London this October Staying abreast of fast-paced industry developments is crucial for cyber security professionals. And while one can learn a lot from publications and social media, it's hard to beat the value of insights gained first-hand from peers. This is why 150+ IT ...

OilVoice Press - OilVoice

Posted 1 year agoPress > cybereurope

Africa E&P Summit

The organisers of the Africa E&P Summit are bringing together Africa's leading exploration companies and governments, just one of the many reasons why you should be attending frontier's event that they are organising and hosting in London at the IET: Savoy Place, 22-23 May. Over 200 key senior exec ...

OilVoice Press - OilVoice

Posted 1 year agoPress > Africasummitoil summit +2

Equinor Deepens in Offshore Wind in Poland

Equinor has exercised an option to acquire a 50 % interest in the offshore wind development project Bałtyk I in Poland from Polenergia. This transaction is a follow-up of the agreement between the two companies which came into force in May 2018 , by which Equinor acquired a 50 % inter ...

OilVoice Press - OilVoice

Posted 1 year agoPress > EquinorEquinor EnergyPoland +2

Nigeria has highest capex on crude and natural gas projects in sub-Saharan Africa Over Next Seven Years, says GlobalData

Nigeria accounts for more than 34% of the proposed capital expenditure (capex) on planned and announced crude and natural gas projects in the sub-Saharan Africa over the period 2018–2025, according to GlobalData , a leading data and analytics company. The company's report: ‘H2 2018 Production ...

OilVoice Press - OilVoice

Posted 1 year agoOpinion > GlobalDataNigeriaCrude +5

CNOOC Signs Strategic Cooperation Agreements with 9 International Oil Companies

HONG KONG, Dec. 18, 2018 /PRNewswire/ -- CNOOC Limited (the "Company", SEHK: 00883, NYSE: CEO, TSX: CNU) announced today that its parent company, China National Offshore Oil Corporation (CNOOC), has signed Strategic Cooperation Agreements with 9 international oil companies including: Chevron, Conoco ...

OilVoice Press - OilVoice

Posted 1 year agoPress > CNOOCChina National Offshore Oil CorporationChevron +11
All posts from oilvoice